Death, taxes and the American tradition

The proposed tax deal between President Obama and congressional Republican leaders includes a revision of the federal estate (inheritance) tax. At stake are issues as old as the nation:

individual property rights versus the democratic ethos, and the need for savings versus the need for resources for the common good. For

many of today’s issues — such as Internet neutrality or nuclear

disarmament — appealing to the founders seems clearly inappropriate.

But in the case of the estate tax, the founders struggled with the

same issues that we struggle with today. And many of them — though

not all — believed that taxing and reducing large estates was a good

idea, for it benefited society as a whole.

Today Republicans would like to repeal the estate tax completely,

while Democrats want to retain it. The proposed tax package would

exempt the first $5 million of estates and levy a 35 percent tax on

anything above that. Should the deal not go through, the inheritance

tax is scheduled on Jan. 1 to revert to 2001 levels, exempting the

first $1 million with a rate of 55 percent on the value exceeding that

amount.

For years, Republicans have loudly proclaimed their desire to abolish the “death tax,” their name for the inheritance tax. And they and their Tea Party movement allies have called for a general reduction in taxes in accord with their view of the American Revolution as an anti-tax revolt. Furthermore, because the first modern estate tax was enacted in 1916, they have argued that it is merely a Progressive-era idea, foreign to the founders, who wanted to defend property at all costs.

But the actual history is more complex and more instructive.

Just as we do today, the American Revolutionary generation wrestled with the question of how much property the dead should be allowed to pass on to their children. For us, it is partly a fiscal

concern: requiring the wealthy to pay taxes on estates is a way to

lower federal deficits with minimal social cost. The idea of using an

inheritance tax to raise revenue occurred to the nation’s first politicians, too. In 1797, the Congress voted and President John

Adams signed into law an estate tax to fund the building of a federal

navy.

Today’s debate echoes that of the nation’s founders in another, more

profound way. Does allowing a small number of families to accumulate

great wealth — increasing from generation to generation — harm

democracy? The U.S. Constitution’s ban on inherited titles

met with unanimous approval because of the perceived threat posed by

lords and earls to a democratic republic. Similarly, Americans have

always understood that establishing a small group of families with

seemingly unlimited wealth, social privilege and political power

undermines a fundamental American principle: that all citizens are

legally and politically equal.

Some founders wanted to eliminate inheritance entirely. In a letter to James Madison, Thomas Jefferson suggested that all property be redistributed every 50 years, because “the earth belongs in usufruct to the living.” Madison gently pointed out the plan’s

impracticality. Benjamin Franklin unsuccessfully pushed for the first Pennsylvania constitution to declare concentrated wealth “a danger to the happiness of mankind.”

At the other end of the spectrum, the Constitutional Convention

decided to forbid the English practice of allowing the government to

seize the entire estate of a person convicted of treason. They

reasoned that the property even of citizens who had committed the

highest crimes against the nation should not be wholly confiscated.

But, again like today, most people held views in between. By the

1770s, because of the practices of primogeniture (requiring all

property to go to the deceased’s first son) and entail (allowing

families to will property that could never be divided or sold), along

with rich families’ penchant for land speculation, about

three-quarters of Virginia’s good land was owned by only a few hundred

families, out of a population of around 400,000. Pressed by the small

farmers and landless men on whom it depended for military service,

Virginia banned primogeniture and entail in 1777. Virginia reached a

compromise: Rich families didn’t lose their land, but large estates

got broken up over time, thereby loosening the richest families’ grip

over Virginia’s economy and politics.

So, as with other political issues — even independence itself — Revolutionary-era Americans held a range of views on how much